How to invest in the stock,forex market using eToro (past two)

Copying other good traders (CopyTrader)

This is the simplest way to invest on eToro and so the most
recommended path for beginners. When you copy someone, every trade they
execute is simultaneously opened in your account too and then closed
when they close it.
It’s all proportional to what % of your total account’s funds you
choose to allocate to them (more on this later), but ultimately you will
achieve the same rate of return as they do.
Finding reliable traders to copy on eToro isn’t always as
straightforward as it might appear. You need to know what to look for
and what to stay clear of (more on this later on). Allow me to help you
master the art of copy trading…

Avoid the most common mistakes!

Let me point out the numero uno mistake beginners make right away: being a sheep.
When you venture into the ‘People’ section looking for a trader to copy
it’s intuitive to sort by ‘most copied’ and blindly copy the top
results. You’d think that the most copied people have lots of copiers
for a reason, right? The wisdom of the crowd perhaps.
But the reality is that most people on eToro are complete beginners
and don’t really know what they are doing. If a few people copy a trader
for the wrong reasons, that trader can quickly ‘go viral’ with
exponentially more copiers following suit without thinking for
themselves. Let me give you an example.

A popular yet under-performing eToro trader

Even though this trader has extremely poor performance (he would have
lost half of your money over the last month if you’d copied him), he
still has close to 4,000 people copying him! Bizarrely this happens
quite a lot on eToro, so I’ll be explaining the process I follow when
copy trading.
Having warned against consistently under-performing traders, the other big pitfall beginners fall into is over-trading.
It’s incredibly tempting to keep checking how much you’ve made or lost
every few hours, but emotions will cloud your better judgement and lead
to tinkering.
No trader will EVER profit every single week or month, so I highly
recommend you take a medium/long-term approach. This requires patience
and discipline, but you’re more likely to see better gains over time.

Finding the best traders to copy

I’ll now walk you through assessing an individual trader before
outlining the exact steps to copy a trader, so you can understand what
to look for and how the process works.
I’ll use myself in this example (@misterg23), then you’ll be ready to go and look for others to copy too.

Viewing a trader’s stats

By clicking on the ‘stats’ tab in a trader’s profile you can access
some very useful information to help determine whether they are worth
copying or not.

Update: the stats page has changed a little, but essentially the same info is there.

Below you can see my own returns since I started on eToro. If you had
copied me with $100 a year ago, you would now have about $225. How does
that compare to your savings account’s interest rate? It goes without
saying that such returns do come with risk too – if you had started
copying me a month ago, you would be down around 10%.

My eToro performance

The other key things to look at are the drawdowns and the average trade size. These stats are for my last three months trading.

Trader’s risk/reward stats

The weekly drawdown shows the maximum I’ve ‘been down’ in a single
week during this period. The average trade size is relative to my total
equity. In other words a 0.8% average trade size means that, on average,
assuming I have $1000 in my account, each trade would be around $8.
It’s not so much the $ amount we care about, but the % proportion.
Again, this is to establish how safe or reckless a trader is.
If like in my case the average trade size is very low, this is a sign
of a safe and reliable trader. Think about it – even if a few trades go
completely wrong I’ve still only lost a few percent of my account
overall. So if you see someone with a high average trade size, BEWARE.
If they get just one or two trades wrong, all their money is gone (and
so is yours if you are copying them!).

How to copy a trader

Copying itself is simple. Once you’ve found a trader who you feel is
reliable, simply open their profile and click on the ‘Copy’ button below
their profile picture.

Copying a trader

You’ll then be prompted to enter an amount with which to copy that trader, and you’ll see some useful information appears.
The “1.5% of realized equity” (in the example above)
simply means that $100 is 1.5% of the total you have in your account.
So this gives you an indication of how many of your proverbial eggs you
are putting into this trader’s basket.
To maintain a sensible, diversified portfolio of investments I
personally wouldn’t allocate any more than 25% to any single trader.
“Your projected average trade size” leads us to how
the copying actually works in real dollar terms. In the example above,
each trade you copy from this person will be (on average) $1.87.
Proportionally this is just 1.87% ($1.87 out of the $100) of your total
investment in them. In this case, it’s a very good sign as it shows a
cautious and safe investment style.